Rambus Inc.
Apr 21, 2011

Rambus Reports First Quarter Financial Results

First Quarter Fiscal 2011 Business and Financial Highlights

SUNNYVALE, Calif.--(BUSINESS WIRE)-- Rambus Inc. (NASDAQ:RMBS), one of the world's premier technology licensing companies, today reported financial results for the first quarter ended March 31, 2011.

GAAP Financial Results

Revenue for the first quarter of 2011 was $62.5 million, down 31% sequentially from the fourth quarter of 2010 primarily due to one-time catch up revenue from the Elpida and Renesas license agreements in the fourth quarter of 2010. As compared to the first quarter of 2010, revenue was down 61% primarily due to revenue recognized from agreements signed with Samsung during the first quarter of 2010.

Total operating costs and expenses for the first quarter of 2011 were $54.2 million, which included general litigation expenses of $9.2 million and a credit from gain from settlement of $6.2 million. This is compared to total operating costs and expenses for the fourth quarter of 2010 of $48.0 million, which included general litigation expenses of $5.8 million and a credit from gain from settlement of $10.3 million. Total operating costs and expenses (recoveries) in the first quarter of 2010 were a recovery of $40.3 million, which included general litigation expenses of $7.0 million and a credit from gain from settlement of $95.9 million.

Net loss for the first quarter of 2011 was $4.2 million as compared to a net income of $33.1 million in the fourth quarter of 2010 and a net income of $150.9 million in the first quarter of 2010. Diluted net loss per share for the first quarter of 2011 was $0.04 as compared to a net income per share of $0.29 in the fourth quarter of 2010 and a net income per share of $1.28 in the first quarter of 2010.

Non-GAAP Financial Results (1)

Customer licensing income in the first quarter of 2011 was $68.7 million as compared to $101.2 million in the fourth quarter of 2010 and $257.8 million in the first quarter of 2010.

Non-GAAP operating costs and expenses in the first quarter of 2011 were $49.9 million as compared to $48.7 million in the fourth quarter of 2010 and $46.2 million in the first quarter of 2010.

Non-GAAP operating income in the first quarter of 2011 was $18.8 million as compared to $52.5 million in the fourth quarter of 2010 and $211.6 million in the first quarter of 2010.

Non-GAAP net income in the first quarter of 2011 was $10.2 million as compared to $32.1 million in the fourth quarter of 2010 and $134.3 million in the first quarter of 2010.

Other Financial Highlights

Cash, cash equivalents, and marketable securities as of March 31, 2011 were $508.6 million, a decrease of approximately $3.4 million from December 31, 2010. The decrease was primarily due to cash used in operations and for purchases of property, plant and equipment during the quarter.

During the quarter ended March 31, 2011, the Company paid withholding taxes of approximately $4.2 million. As the Company continues to maintain a valuation allowance against its U.S. deferred tax assets, the Company's tax provision is based on a projected annual effective tax rate consisting of state, foreign and withholding taxes applied to year-to-date pretax income results for the quarter.

The conference call discussing 2011 first quarter results will be webcast and can be accessed via Rambus' web site at http://investor.rambus.com at 2:00pm Pacific Time today. A replay will be available following the call on Rambus' Investor Relations web site or for one week at the following numbers: (800) 642-1687 (domestic) or (706) 645-9291 (international) with ID#58589190.

Forward Looking Statements

This press release may contain forward-looking statements related to our estimates and expectations for future financial performance and other related events. Actual results may differ materially from those contained in any forward-looking statements. Please refer to the documents Rambus files with the SEC, including Rambus' most recent Form 10-K and Form 10-Q. These SEC filings contain and identify important factors that could cause Rambus' consolidated financial results to differ materially from those contained in Rambus' forward-looking statements. Although Rambus believes that the expectations reflected in the forward-looking statements are reasonable, Rambus cannot guarantee future results, levels of activity, performance or achievements. Rambus is under no duty to update any of the forward-looking statements after the date of this press release to conform to actual results. Our business generally is subject to a number of risks which are described more fully in our SEC filings including our Forms 10-K and 10-Q.

(1) Non-GAAP Financial Information

In the commentary set forth above and/or in the financial statements included in this earnings release, the Company presents the following non-GAAP financial measures: customer licensing income, operating costs and expenses, operating income and net income. In computing each of these non-GAAP financial measures, the Company combines revenue and gain from settlement and excludes charges or gains relating to: stock-based compensation expenses, amortization expenses, costs of restatement and related legal activities and non-cash interest expense. The non-GAAP financial measures disclosed by the Company should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and the financial results calculated in accordance with GAAP and reconciliations from these results should be carefully evaluated. Management believes the non-GAAP financial measures are appropriate for both its own assessment of, and to show investors, how the Company's performance compares to other periods. The non-GAAP financial measures used by the Company may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies. Reconciliation from GAAP to non-GAAP results is included in the financial statements contained in this release.

Our non-GAAP financial measures reflect adjustments based on the following items:

Customer licensing income. Customer licensing income includes the Company's measure of the total royalties received from our customers, under our licensing agreement with them. In connection with the Samsung settlement, the Company bifurcates royalty payments that it receives between revenue and gain from settlement, which is reflected as a contra expense in operating expenses for GAAP purposes. The Company has combined revenue from our customers, including Samsung, and the gain from the Samsung settlement as customer licensing income to reflect the total amounts received from our customers, including Samsung under the relevant agreements.

Stock-based compensation expense. These expenses consist primarily of expenses related to employee stock options, employee stock purchase plans, employee restricted stock and employee restricted stock units. The Company excludes stock-based compensation expense from its non-GAAP measures primarily because they are non-cash expenses that the Company does not believe are reflective of ongoing operating results. Additionally, given the fact that other companies may grant different amounts and types of equity awards and may use different option valuation assumptions, excluding stock-based compensation expense permits more accurate comparisons of the Company's results with other peer companies.

Amortization expense. The Company incurs expenses for the amortization of intangible assets in connection with acquisitions. The Company excludes these items because these expenses are not reflective of ongoing operating results in the period incurred. These amounts arise from the Company's prior acquisitions and have no direct correlation to the core operation of the Company's business.

Costs of restatement and related legal activities. These expenses consist primarily of investigation, audit, legal and other professional fees related to the 2006-2007 stock option investigation and related litigation, as well as recoveries received from third parties. The Company excludes these costs and recoveries from its non-GAAP measures primarily because the Company believes that these non-recurring costs and recoveries have no direct correlation to the core operation of the Company's business.

Non-cash interest expense. The Company incurs non-cash interest expense related to its convertible notes. The Company excludes non-cash interest expense related to its convertible notes to provide more accurate comparisons of the Company's results with other peer companies and to more accurately reflect the Company's on-going operations.

Income tax adjustments. For purposes of internal forecasting, planning and analyzing future periods that assumes net income from operations, the Company estimates a fixed, long-term projected tax rate of approximately 36 percent. Accordingly, the Company has applied the 36 percent tax rate to its non-GAAP financial results to assist the Company's planning for future periods.

From time to time in the future, there may be other items, such as significant asset impairments, restructuring charges or significant gains or losses from contingencies that the Company may exclude if it believes that doing so is consistent with the goal of providing useful information to investors and management.

About Rambus Inc.

Rambus is one of the world's premier technology licensing companies. Founded in 1990, the Company specializes in the invention and design of architectures focused on enriching the end-user experience of electronic systems. Additional information is available at www.rambus.com.

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Rambus Inc.
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
 

 

 

March 31,
2011

 

December 31,
2010

ASSETS
 
Current assets:
Cash and cash equivalents $ 182,234 $ 215,262
Marketable securities 326,341 296,747
Accounts receivable 389 2,600
Prepaids and other current assets 10,988 10,898
Deferred taxes   2,420   2,420
Total current assets 522,372 527,927
Deferred taxes, long-term 3,020 2,974
Intangible assets, net 39,007 40,986
Goodwill 18,154 18,154
Property, plant and equipment, net 70,520 67,770
Other assets   6,086   5,361
Total assets $ 659,159 $ 663,172
 
LIABILITIES, CONTINGENTLY REDEEMABLE COMMON STOCK & STOCKHOLDERS' EQUITY
 
Current liabilities:
Accounts payable $ 11,292 $ 5,952
Accrued salaries and benefits 9,907 31,634
Accrued litigation expenses 4,744 4,060
Other accrued liabilities   11,778   14,165

Total current liabilities

37,721 55,811
Long-term liabilities:
Convertible notes, long-term 124,359 121,500
Long-term imputed financing obligation 34,362 27,899
Other long-term liabilities   9,690   9,679
Total long-term liabilities   168,411   159,078
Contingently redeemable common stock   113,500   113,500
Total stockholders' equity   339,527   334,783
Total liabilities, contingently redeemable common stock and stockholders' equity $ 659,159 $ 663,172
 
Rambus Inc.
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
 

 

 

Three Months Ended
March 31,

  2011       2010  
Revenue:
Royalties $ 59,235 $ 160,542
Contract revenue   3,292     1,322  
Total revenue   62,527     161,864  
Operating costs and expenses:
Cost of revenue (1) 3,149 1,854
Research and development (1) 23,317 21,691
Marketing, general and administrative (1) 32,732 31,527
Costs of restatement and related legal activities 1,159 526
Gain from settlement   (6,200 )   (95,900 )
Total operating costs and expenses (recoveries)   54,157     (40,302 )
Operating income 8,370 202,166
Interest income and other income (expense), net (652 ) 425
Interest expense on convertible notes   (5,172 )   (6,016 )
Interest and other income (expense), net   (5,824 )   (5,591 )
Income before income taxes 2,546 196,575
Provision for income taxes   6,776     45,676  
Net income (loss) $ (4,230 ) $ 150,899  
Net income (loss) per share:
Basic $ (0.04 ) $ 1.33  
Diluted $ (0.04 ) $ 1.28  
 
Weighted average shares used in per share calculation
Basic   107,613     113,132  
Diluted   107,613     117,463  
 

(1) Total stock-based compensation expense for the three month periods ended
March 31, 2011 and March 31, 2010 are presented as follows:

 

Three Months Ended
March 31,

  2011     2010  
Cost of revenue $ 123 $ 100
Research and development $ 2,512 $ 2,569
Marketing, general and administrative $ 4,655 $ 5,165
 
Rambus Inc.
Supplemental Reconciliation of GAAP to Non-GAAP Results
(In thousands)
(Unaudited)
 
  Three Months Ended
March 31, 2011   December 31, 2010   March 31, 2010
 
Revenue $ 62,527 $ 90,921 $ 161,864

Adjustments:

Gain from settlement   6,200     10,300     95,900  
Total customer licensing income $ 68,727   $ 101,221   $ 257,764  
 
Operating costs and expenses (recoveries) $ 54,157 $ 48,038

(40,302

)

Adjustments:
Stock-based compensation (7,290 ) (7,320 )

(7,834

)

Amortization (1,979 ) (1,479 )

(1,086

)

Costs of restatement and related legal activities (1,159 ) (797 )

(526

)

Gain from settlement   6,200     10,300     95,900  
Non-GAAP operating costs and expenses $ 49,929   $ 48,742   $ 46,152  
 
Operating income $ 8,370 $ 42,883 $ 202,166
Adjustments:
Stock-based compensation 7,290 7,320 7,834
Amortization 1,979 1,479 1,086
Costs of restatement and related legal activities   1,159     797     526  
Non-GAAP operating income $ 18,798   $ 52,479   $ 211,612  
 
Net income (loss) $ (4,230 ) $ 33,084 150,899
Adjustments:
Stock-based compensation 7,290 7,320 7,834
Amortization 1,979 1,479 1,086
Costs of restatement and related legal activities 1,159 797 526
Non-cash interest expense on convertible notes 3,016 2,834 3,860
Income tax adjustments   1,020     (13,430 )  

(29,881

)

Non-GAAP net income $ 10,234   $ 32,084   $ 134,324  
 
Non-GAAP basic net income per share $ 0.10 $ 0.29 $ 1.19
Non-GAAP diluted net income per share $ 0.09 $ 0.28 $ 1.14
Weighted average shares used in non-GAAP per share calculation:
Basic 107,613 111,530 113,132
Diluted 110,626 114,461 117,463

Rambus Inc.
Linda Ashmore, 408-462-8411
Public Relations
lashmore@rambus.com
Nicole Noutsios, 408-462-8050
Investor Relations
nnoutsios@rambus.com

Source: Rambus Inc.

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